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Cloud Monitoring IPO Leader Digs Up New Buy Zone

With cloud computing essential to mobile apps and the Internet of Things (IoT) anytime, anywhere access, Datadog (DDOG) helps companies monitor that activity with deep database learning. Now DDOG stock is sniffing out a fresh buy zone after rising as much as 394% since its September 2019 IPO.




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That performance has earned DDOG stock a spot on the IBD 50 list of top growth stocks. Datadog also joins cloud computing and mobile app ecosystem innovator AppLovin (APP) on the IPO Leaders screen stock.

While the run for DDOG stock since its IPO has been as bumpy as it has been big, sales growth has been impressively strong and steady.

Over the last eight quarters, revenue growth has ranged from 51% to 88%. The New York-based company has generated average annual sales gains of 74% over the last three years.

As new IPOs often do, Datadog showed strong revenue before profits began to kick in. After several quarterly reports of strong EPS growth based on comparisons to prior-year quarters that showed a loss, Datadog has begun establishing a track record of profitability.

Datadog posted 400% and 100% EPS increases in Q3 and Q4 2020, respectively. Although earnings were flat in Q1 of this year, EPS growth bounced back to an 80% gain last quarter.

Analysts expect the company to post a 20% gain when Datadog reports on Nov. 10, and 27% earnings growth for the full year.


See Who Joins DDOG Stock On IBD Leaderboard


Datadog Digs Into Deep Database Learning

Working with organizations of all sizes, Datadog provides a monitoring and security platform for cloud applications. It integrates and automates monitoring of infrastructure and apps, as well as log management.

In August, the cloud leader announced the general availability of Database Monitoring (DBM). DBM provides engineers and database administrators the visibility needed to quickly find and fix application performance issues arising from slow running database queries.

Database queries — including unnecessary ones that bog down clients’ systems — are often the root cause of app performance issues. Databases do not store historical query performance metrics, which makes it extremely difficult to understand trends and pinpoint specific issues. The time required to investigate and debug problems prolongs downtime, causing a negative impact on the customer experience.

Datadog allows users to pinpoint the exact queries that impact application performance and user experience. With DBM, developers and engineers can see the performance of database queries, troubleshoot slow queries and execution breakdowns, and analyze historical trends.

DDOG Stock Sniffs Out Fresh Buy Zone

Earning a spot on the IBD Leaderboard watchlist, DDOG stock has bounced off its 50-day moving average, rising into a buy zone.

After a breakout, the first bounce off the 50-day line can offer a new entry.

DDOG stock reset its base count in March when it undercut the low in its prior chart pattern. That made its subsequent cup with handle a first-stage base.

After breaking out of that new base, DDOG stock continued to climb until pulling back to test support at the key 50-day moving average. As it found support at that benchmark, note how the relative strength line has also been rising, indicating market leadership.

On the downside, the stock market remains in a correction. It’s tough for stocks to make a sustained climb while the major indexes are in a downtrend.

But the stock market outlook can turn quickly. Plus, with earnings season coming into focus, new reports from leading growth stocks may drive a shift in trend for the better.

DDOG stock is up over 2% Monday, but volume is trending below average. Look for heavy trade on the upside to kick in.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.

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